Premium traffic improves but outlook less than clear: IATA
Global premium travel rose 9.5% year-on-year in May-2011, but concern about slowing economic activity in key premium travel markets in North America and Europe, combined with a steady deterioration in business confidence, leave reason for caution. IATA has warned that the latest monthly growth may be exaggerating the underlying rate of growth and a significant fall-back to lower rates could bee seen in the Jun-2011 data.
IATA total premium traffic growth: Apr-2009 to May-2011
Source: Centre for Asia Pacific Aviation and IATA
After weak levels earlier in the year, the better performance of premium traffic is encouraging. The two-speed recovery in premium traffic levels has slowly given way to a more broad-based return to growth - although certain markets are still showing mixed results.
Some of the most important premium travel markets, particularly those linking Europe and North America with the rest of the world, have been showing robust growth. Travel over the North Atlantic - accounting for 18.9% of premium passengers and 29.8% of premium passenger revenue - saw premium passenger numbers up 11.1% in May-2011, and has grown 12.4% for the year-to-date. IATA stated the decline in US business confidence "signals slower rates of expansion" and European business confidence is also suffering in certain countries.
Yields are still highly variable according to region. IATA estimates that premium revenues are expanding in "the low teens". US airlines have been reporting yield growth of "close to 10%" p/a, while European yield growth has been around half this level.
Some regional premium travel markets are also performing well, most notably within Europe and in Far East Asia. Other regional markets have not been as healthy: premium traffic within North America is down more than 10% for the year, while Southwest Pacific premium traffic is down by nearly 20%. Central American premium traffic continues to plummet, down 65.9% in May and 57.1% for the year so far.
The two markets connecting the Middle East (Europe-Middle East and Middle East-Far East) have again shown strong growth, with both routes up by 11% in May. Regional premium travel is still suffering from the after-effects of the social unrest that gripped the MENA region earlier in the year, although higher oil prices and regional economic growth are aiding the recovery.
IATA Middle East premium revenue share vs premium traffic share: Aug-2008 to May-2011
Source: Centre for Asia Pacific Aviation and IATA